Tax law stipulates that property values must be assessed separately for gift tax purposes. This is also evident from a ruling by the Federal Fiscal Court on July 26, 2023 (Ref.: II R 35/21).
For gifts, tax law provides tax exemptions for close relatives. For spouses and life partners, the exemption is currently 500,000 Euros, and for children, 400,000 Euros. After ten years, the exemptions can be used again. The tax leeway that tax law provides for inheritances and gifts should be fully utilized. The business law firm MTR Legal Rechtsanwälte provides their clients with an attorney versed in tax law.
To transfer assets in a tax-optimized manner, one should act proactively and involve a tax lawyer at an early stage. This is especially true for gifts of real estate, as the proceeding before the BFH shows.
In this case, the plaintiff received a share of co-ownership of a property from his father as a gift in 2012. The responsible tax office valued the property at 90,000 Euros. Since the son’s exemption of 400,000 Euros was not exceeded, no gift tax was due.
Five years later, the father gifted 400,000 Euros to his son. Since this was the second gift within the ten-year period, the tax office determined the total value of the two gifts. As the son’s exemption was now exceeded, the tax office set the gift tax at 10,000 Euros. It took into account the property value of 90,000 Euros as it was assessed in 2012.
The son objected to this. The property had already been overvalued in 2012. However, since no gift tax was due, he left it at that. But now the value should be corrected downward. As it turns out, the son should have sought expert advice from a tax lawyer at an early stage. The lawyer could have explained to him back in 2012 that he should contest the assessment value. Because this value is also the basis for all other gifts within the ten-year period, as the BFH emphasized.
MTR Legal Rechtsanwälte advises on gift tax and other tax law issues.
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